Following a discussion with institutions from the West African Economic and Monetary Union (WAEMU) earlier this month, the fund said yesterday that the bloc’s member states can’t continue to slip on their pledges to cut the deficit.
The union, which includes Benin, Burkina Faso, Ivory Coast, Guinea-Bisseau, Mali, Niger, Senegal and Togo, have agreed they will cut their budget deficits to 3% of GDP by 2019 as the countries seek greater convergence and integration.
Boileau Loko, who led the IMF staff team for the discussions with the WAEMU, urged nation states to “stick to their planned fiscal consolidation paths”, which he said had “repeatedly deferred” in recent years with most countries instead scaling up public investment
“Continued delays in implementing fiscal consolidation would further increase public debt, raising debt distress and putting the currency coverage at risk,” he noted.
The region has not been hit so dramatically by the collapse in prices as more oil- or commodity-reliant economies on the continent in terms of growth, which is expected to remain at around 6%.
In some cases, large infrastructure spending in WAEMU members has aided this. However, in some cases this has been accompanied by a drop in revenue collection that hasn’t been appropriately addressed by fiscal policy.
Niger, for example, where security and humanitarian emergencies, weak commodity prices and subdued trade are weighing on growth, saw its total revenues contract dramatically between 2015 and 2016 – a change worth 12% of GDP.
While they are expected to stabilise to 2014 levels this year, the fund predicts they will decline somewhat again in 2018. Yet, it pointed out, the country is ramping up its public investment.
Instead, the IMF urged all countries in the union to focus on the “steadfast” implementation of plans to contain spending, improve public financial management, increase public investment efficiency and strengthen debt management in order to create the space for such spending.
“At the same time, a slow implementation of key structural reforms would prevent the private sector to take over the lead in generating strong and inclusive growth,” Loko added.
